JPMORGAN Chase & Co, the third-biggest United States bank, said profit fell 50 percent, matching analysts' estimates, after US$5.1 billion of writedowns and provisions linked to home-equity loans, financing for leveraged buyouts and subprime mortgages.
First-quarter net income dropped to US$2.37 billion, or 68 cents a share, from US$4.79 billion, or US$1.34, a year earlier, the New York-based bank said yesterday. JPMorgan rose in early trading.
"No bad news is good news," Charles Bobrinskoy, vice chairman of Ariel Capital Management LLC in Chicago, said in a Bloomberg Television interview. "In this environment, being able to post earnings as they did is, I think, all-in good news."
JPMorgan, which has posted about US$10 billion of writedowns and losses since the beginning of last year, is now grappling with a sagging labor market that has hurt clients' ability to pay credit cards and consumer loans on time.
The company set aside US$1.1 billion in the first three months of 2008 for future home-equity loan defaults, after boosting those provisions by US$395 million in the fourth quarter.
Stress ahead
"Our expectation is for the economic environment to continue to be weak and for the capital markets to remain under stress," said Chief Executive Officer Jamie Dimon.
Revenue fell 11 percent to US$16.9 billion, compared with the average estimate of US$16.8 billion among analysts surveyed by Bloomberg News. Return on equity, a gauge of how effectively the company reinvests earnings, was 8 percent, compared with 17 percent a year earlier.
Earnings matched the average estimate of 15 analysts surveyed by Bloomberg, and beat Thomson Financial's survey by 4 cents a share.
JPMorgan rose 2.1 percent in early New York trading, to US$43. The shares have fallen almost 16 percent on the New York Stock Exchange during the past 12 months, compared with 57 percent at bigger rival Citigroup Inc.
The investment-banking division lost US$87 million in the first quarter, compared with profit of US$1.5 billion the previous year. Revenue from that business fell by half as JPMorgan marked down US$1.1 billion of leveraged loans and US$1.2 billion of mortgage-related securities.